State looks to Canada for drugs / Seeking cheaper pharmaceuticals for prisons, state hospitals

Christian Berthelsen, Chronicle Staff Writer

Published
4:00 am PST, Friday, January 23, 2004

State Senate President Pro tem John Burton says he would introduce legislation to allow California to buy Canadian drugs for state hospitals and prisons during a Capitol news conference held in Sacramento, Calif., Thursday, Jan. 22, 2004. (AP Photo/Rich Pedroncelli) less

State Senate President Pro tem John Burton says he would introduce legislation to allow California to buy Canadian drugs for state hospitals and prisons during a Capitol news conference held in Sacramento, ... more

Photo: RICH PEDRONCELLI

Photo: RICH PEDRONCELLI

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State Senate President Pro tem John Burton says he would introduce legislation to allow California to buy Canadian drugs for state hospitals and prisons during a Capitol news conference held in Sacramento, Calif., Thursday, Jan. 22, 2004. (AP Photo/Rich Pedroncelli) less

State Senate President Pro tem John Burton says he would introduce legislation to allow California to buy Canadian drugs for state hospitals and prisons during a Capitol news conference held in Sacramento, ... more

Photo: RICH PEDRONCELLI

State looks to Canada for drugs / Seeking cheaper pharmaceuticals for prisons, state hospitals

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2004-01-23 04:00:00 PDT Sacramento -- State legislators are hoping to bring California into a national battle pitting cities and states against the federal government in a dispute over prescription drug purchases from Canada, which carry potential savings in the hundreds of millions of dollars over the same drugs purchased domestically.

The disagreement has been heating up since last year, when city and state governments from New England and the Midwest began seeking U.S. government approval to buy prescription drugs for their workers from Canada, where prices are as much as 30 to 50 percent lower because of government-imposed cost controls there.

So far, the United States has taken a dim view of the idea, and major U.S. drug companies such as Pfizer have also moved to try to limit the practice.

The debate appears certain to inflame political tensions within California as well, with the liberal Democratic-controlled Legislature urging for access to price-controlled drugs while Republican Gov. Arnold Schwarzenegger, who has made job creation a central theme of his tenure, may be sensitive to industry assertions that such a move will take high-paying biotechnology jobs.

On Thursday, state Sen. John Burton, D-San Francisco, announced he would carry legislation allowing the Department of General Services -- the state's purchasing agent, which buys drugs for patients in its care at prisons and hospitals -- to consider Canadian sources when buying drugs on behalf of the state.

"I have great difficulty figuring out why something is cheaper in Ottawa than it is in Detroit, Mich., but that's the way it goes," Burton said. Asked whether he was reluctant to put the state in direct conflict with the federal government, Burton said: "No, I love it. There's nothing I like more than conflict, especially when I'm on the right side of the issue."

Ashley Snee, a spokeswoman for Schwarzenegger, said Thursday that the governor had not developed a position yet and noted there were "legal issues and quality control issues" with the importation of drugs from Canada.

Assemblyman Dario Frommer, D-Los Angeles, said he was also intending to move forward with similar legislation. While it has the more modest goal of simply petitioning the U.S. Department of Health and Human Services for a legal exemption, it would have the same ultimate goal as Burton's.

Burton said California could save as much as $30 million per year if the state were allowed to purchase the same prescription drugs from Canada. The state spent $176 million for prescription drugs last year, a 354 percent increase since 1996. About 80 percent of the spending on drugs comes from correctional facilities.

Drug companies say the cut in profits that reimportation of U.S. drugs causes hurts their ability to spend money on research and development of new drugs.

Representatives of Pfizer, the world's largest drug company, said Thursday that allowing widespread purchases from Canada would hurt the company's ability to develop new drugs.

"Obviously, research and development efforts in the pharmaceutical industry are an extremely expensive undertaking," said Dr. Joe Hammang, the director of scientific policy and public affairs for Pfizer. "We invest billions of dollars to develop medicine each year, including over $7 billion in 2003."

Critics maintain that as much as two-thirds of the pharmaceutical industry's research and development expenses are funded by taxpayer money. And still, reports show that in 2001 and 2002 the company earned more than twice as much in operating profits as it spent on research and development.

Dr. David Gollaher, the president and chief executive of the California Health Institute, a trade group representing the state's biotechnology industry, called the Canadian drug buying plan "a terrible idea and a terrible plan."

So far, federal agencies have taken the drug industry's side.

The Food and Drug Administration maintains that reimportation is illegal, because Canadian pharmacies do not maintain the same quality control standards that the United States does. The Department of Health and Human Services can grant waivers to cities and states to experiment with pilot programs, but it has denied some requests, including Illinois' as recently as last month.

Representatives for the FDA and the Department of Health and Human Services did not return telephone calls seeking comment Thursday.